The Menke Group was proud to advise and assist Colorado-based Applewood Seed Company, a wholesale supplier of bulk wildflower and garden seeds, with the design and implementation of their Employee Stock Ownership Plan (ESOP). The transaction, which closed on July 31st, 2020, is a critical component of the company’s comprehensive succession plan, and will keep Applewood Seed Company private, independent, and thriving for many years to come.
Applewood Seed employees celebrate the company’s transition to an Employee Stock Ownership Plan
Applewood Seed Company was founded by Gene Milstein in 1965 in Golden, CO. In the 1970s, they implemented a research program to study most aspects of planting, growing, and cultivating wildflowers. In the 1980s, Applewood began marketing bulk wildflower seeds to the landscape industry. With a staff of 18, they maintain a global presence, providing high quality wildflower seeds to buyers in around the world. Anyone who has ever been struck by the beauty of a carefully maintained flower garden, whether on a golf course, at a park, or when driving down the highway, may have Applewood Seed Company to thank.
Applewood Seed was well positioned for the COVID-19 pandemic. With people across America stuck at home for prolonged periods, interest in home gardening surged, increasing the demand for Applewood’s wildflower seeds. At the same time, the realities of the pandemic prompted them to take decisive action to put a succession plan into place.
“We’ve had our share of equity buyers and industry people showing up quarterly, or even monthly to try to buy the company,” said Applewood CEO Norm Poppe. “We have a unique company with a unique culture, and we never felt any of those options were right for us.”
Ryan Guilford joined the company as its Chief Operating Officer in October, 2019, and brought with him an interest in ESOPs. “I had studied ESOPs in graduate school, and taught them for years as adjunct faculty.”
Guilford may not have known when he joined Applewood Seed Company that he would soon have an opportunity to put his knowledge of ESOPs into practice, but under the Milsteins’ leadership, the closely-held company had a strong focus on making the employees feel valued. Their employee benefits program already included 401(k) contributions and profit sharing, as well as a generous health plan.
“We believe our company is the strongest when our employees feel valued, empowered and are given the tools to be successful in their professional and personal lives,” Gene Milstein said in an announcement of their ESOP on their company website.
“Gene has always been paternalistic toward the company, in a good way,” explained Poppe. “We’ve always had really good benefits. The question was, how do we keep this going in perpetuity, not just for the older employees, but for the younger ones who are looking to see how the company takes care of the older ones.”
According to Poppe, they began seriously considering an ESOP in March, when the pandemic was already slowing down much of the economy, and he saw a story about the 10th anniversary of Bob’s Red Mill’s ESOP on the news. Bob’s Red Mill is one of the most recognizable ESOP companies, and the story of founder Bob Moore and his wife Charlee, as well as their commitment to their employees and to philanthropic giving, reminded Poppe of Gene and Dee Milstein.
The news broadcast about Bob’s Red Mill led Applewood to The Menke Group. “Bruce Armstrong and the whole Menke team were amazing,” said Guilford. “The amount of information they provided up front, the amount of free—truly free—resources, advice and guidance they provided, even before a single paper was signed, was incredible.”
“Everyone Menke recommended that we work with throughout the process felt like they were all part of the same team,” said Poppe. “We spoke to other ESOP advisors, and it felt like everyone was fighting for their own concept of how things ought to work. We could tell that would end up costing us in terms of time and money. With Menke, it was like an excellent football play where everyone is in sync, moving the ball down the field and handing it off for a touchdown.”
The Applewood team did their due diligence, speaking to over 15 different ESOP companies ranging from other businesses in the Denver area to other seed wholesalers on the other side of the country. Everything they learned made it clear that an ESOP would be the right fit for their company’s values and goals for the future.
With the Milsteins’ full confidence and support, Menke was able to help Applewood complete the full design and implementation of their ESOP in less than three months. The terms of the transaction ensured that all of their goals for the ESOP were met, including:
- Granting the employee-owners a truly significant stake in the company.
- Ensuring that the Milstein’s long history of philanthropic giving would continue.
- Creating industry-leading benefits for current and future employees.
- Providing substantial liquidity for the sellers.
Most importantly, Applewood Seed Company’s ESOP will protect Gene and Dee Milstein’s legacy for years to come.
“There are only a few companies who do the kind of work that Applewood Seed Company does at their level,” said Menke corporate counsel Michael Pasahow, who oversaw the plan design. “Without a clear succession plan, it could be difficult to fend off acquisition by a competitor. This ESOP will keep their business intact, keep it independent, and protect the jobs they’ve created.”
Poppe said they announced the ESOP to their staff in a virtual meeting because of the pandemic, and it was met with palpable excitement. He also sent out an email to some of their buyers and customers around the world.
“We got a tremendous amount of positive feedback right away,” Poppe said. “I got a call from a client in India, and a wonderful reply from a customer in The Netherlands. There’s this notion that here in America, we only care about money, so they love hearing that we’re making this kind of commitment to our employees and our culture.”
From all of us at The Menke Group, congratulations to Gene and Dee Milstein, and to all the new employee-owners at Applewood Seed Company!
If you want to learn how an ESOP can help your company blossom, contact us today for your free preliminary analysis.
Menke & Associates, Inc. has helped over 3,500 companies successfully transition to employee ownership. Our holistic ESOP approach enables a positive outcome for the company, its employees and its shareholders. We believe ownership is powerful.
